Red Sky to acquire South Australian asset, aims to restore Killanoola project

Red Sky Energy Ltd., Melbourne, has conditionally agreed to acquire Beach Energy Ltd.’s 100% interest in onshore South Australian Otway basin retention license PRL 13 which contains the Killanoola oil project and associated production and oil storage infrastructure.

The 17.5-sq km lease lies in the southeast corner of South Australia close to Jacaranda Ridge and Haselgrove gas fields and the Katnook gas processing facility.

The deal stipulates that Red Sky pay a nominal $1 (Aus.) for the assets. However, Red Sky will be responsible for discharging all obligations attached to the assets including all liabilities relating to the decommissioning, abandonment, rehabilitation, remediation, or restoration of the field.

The Killanoola-1 wildcat drilled in 1998 discovered oil at a depth of 850 m. Tests flowed 34-degree API oil at rates up to 300 b/d. A second well, Killanoola Southeast-1 drilled in 2011 within the retention lease was also a successful oil find but was not tested.

Red Sky has plans to restart production planning for Kilanoola-1, aiming to resume oil production using enhanced recovery techniques. The company will run a 3D seismic survey, test the Killanoola Southeast-1 discovery, and complete a field development plan.

Red Sky sees the acquisition as an opportunity to leverage the recovery from the oil price downturn by quickly returning what it sees as a quality shut-in asset to production. The company is also seeking to prove up and develop further reserves in the unexploited parts of the field.

Red Sky plans a one for one non-renounceable rights issue to raise $4 million (Aus.), the proceeds of which will be used to underpin the redevelopment.

Completion of the deal is subject to a number of conditions, including regulatory approvals. The agreement will be terminated if not all conditions are satisfied and/or waived within 120 days of the date of the agreement.